As the cannabis industry continues to grow and marijuana is recreationalized across the country, consumption and sales are expected to skyrocket. In the coming years, there will be a higher demand for inventory and even more opportunities for aspiring entrepreneurs to establish themselves as cannabis business owners and grow into companies that make millions of dollars in revenue. In the 2020 election alone, four new states decided to approve marijuana for recreational or medical consumption including New Jersey, Arizona, Montana, and South Dakota. These are states that just a decade ago were running anti-marijuana ads and referring to the herb as a gateway drug that led down a path of irreversible addiction.
As more industry newcomers flock to start cannabis businesses, misconceptions and falsehoods can become difficult to identify. Many of these misconceptions are perpetuated by media outlets and consultants in the industry hoping to make a quick buck. Without much experience running a marijuana business, owners can quickly find themselves swimming against the current just trying to stay afloat. In a time when there is such an overwhelming amount of information in the palm of our hands, how are cannabis entrepreneurs supposed to draw the fine line between fact and fiction?
Below are 5 misconceptions about starting a cannabis business that we have identified over the years while working with hundreds of marijuana startups.
Myth #1: Starting a Cannabis Business Anywhere is Easy
Choosing the right location is often the first and most challenging task for new entrepreneurs in the cannabis industry. If you are not properly educated about cannabis laws and how they can vary from state to state and county to county, hiring an expert can save you a lot of time and money. Starting a cannabis business in the state of your choice solely based on the fact that it has passed legalization laws is certainly not easy. Even if you believe that your team has found the best location to set up shop, there could be hidden obstacles lurking around the corner.
For example, just because a city in Southern California has an easy-to-navigate permitting process doesn’t mean that is where the most lucrative opportunity for a new retail location or manufacturing facility is. Because of high levels of competition in some areas of the country, a permit and license are not all you’re going to need to turn a profit. Before you begin to acquire land or lease property, or apply for permits and licenses, be sure to perform a proper competitive analysis to ensure there is room for your new business in the local market.
Myth #2: Growth Strategy Should be an Afterthought
Understanding what it is going to take to get from point A to point B as a cannabis business owner should always be a forethought, not an afterthought. Studying the framework of the application process and all the other hoops you will inevitably be required to jump through in order to grow can put you miles ahead of the competition. Establishing a proper growth strategy may require you to analyze your budget, put together a team of experts, and conduct countless hours of research. There is nothing worse than not being prepared when a business-threatening hurdle comes your way. Or even worse, an opportunity for growth that your team is not prepared to take advantage of.
It is shocking when you begin to realize just how many new cannabis companies encounter bumps in the road that could have been avoided with just a bit of forethought and preparation. Underestimating startup costs, jumping in headfirst without a growth strategy, and falling into the trap of mis-hiring are among the top reasons that cannabis retailers, manufacturing businesses and delivery services fail to make it out of the startup phase. All of these pitfalls and more can be avoided by setting up standard operating procedures, establishing an actionable plan to carve out your niche in the industry and developing a proper budget. If you’re hoping to find success as a marijuana business owner, approach the endeavor as you would any other business in a competitive industry. Opportunities in the cannabis industry can come at you quickly, and if you aren’t prepared with a strategy for growth, they are likely to pass you by.
Myth #3: Decisions Should be Made Based Upon Emotion
As a business owner, your decision-making process should never be affected by emotion. Decisions should be made based on your growth strategy to increase profits and improve efficiency, not to satisfy employees or appease competitors. Having worked with hundreds of cannabis businesses across the country, BeGreenLegal has been called on many times by business owners who lacked decision-making skills and dug themselves, and their brand, into a hole.
False confidence and unresearched decisions may work for a while, but if any mistakes are made along the way operations can quickly spiral out of control. As with any other professional setting, your decisions as a leader can affect the entire company and directly influence the revenue of your business. If ever you are feeling pressured to make a decision without all of the proper information, take the time to speak with a cannabis business expert who is knowledgeable and able to help you make an informed determination.
Myth #4: Lawyers are Project Managers
Some startup marijuana companies hire a lawyer, believing they will guide and advise on all facets of building a successful cannabis business. Some lawyers may be talented enough to serve as project managers in addition to providing legal advice, but that likely isn’t the most efficient way to accomplish your goals. Experts in the cannabis industry who have worked with successful cannabis businesses are typically much more qualified to explain the framework to you than any lawyer will be. Lawyers may be knowledgeable about filing processes and the amount of time you can take to respond to city requests, but shouldn’t be counted on to advise as to how to improve your odds of being approved for a cannabis license.
There is an extremely common misconception in the cannabis industry that the application process for a cannabis permit or license is a legal process. Contrary to popular belief, the marijuana application process is a technical process requiring a unique industry knowledge. Many legal professionals haven’t had the years of experience necessary to successfully advise marijuana-related businesses. What is needed is a specialized strategist and a project manager with a roadmap for success. Hiring a real estate agent, lawyer or cannabis expert can be a smart move in a lot of cases. It can also prove to be an expensive mistake if the professional you hire isn’t up-to-date with the diverse cannabis laws across the country and specific requirements in your city.
Myth #5: All Cannabis Businesses are Wildly Successful
If you are still of the belief that all cannabis businesses are wildly successful, you may be surprised to hear that many marijuana related businesses never make a profit. Throughout the years we have watched the rise and fall of titans in the industry; businesses that some financial experts would have told you were bulletproof just a few years before their demise. Whenever a cannabis company is not able to deliver on their promises to investors, adapt to evolving regulations or cover their overhead, there is always going to be another competitor waiting to take their place.
With that said, there is a lot of profit to be had for business owners who are ready to do things right. If you know what it takes to manage employees, budget and allocate funds, improve operational efficiency, monitor your resources and hire an organized team, the sky’s the limit. A recent article written for Forbes by Will Yakowicz points out that U.S. cannabis sales have hit a record $17.5 Billion, a high point that is expected to be surpassed year after year for the foreseeable future.
This list of misconceptions and falsehoods is just the tip of the iceberg. With new research and data becoming available each year, it’s only getting harder to find a trustworthy source for cannabis business advice. Navigating the road to profitability as a new cannabis owner is never going to be easy, but can be a lot less taxing with the help of a consulting firm like BeGreenLegal. BeGreenLegal is a full-service cannabis consulting agency serving operators and investors who are set on a profitable and scalable business from the ground up.
BeGreenLegal’s team has amassed a knowledge base that rivals any other marijuana consulting firm in the country. Our research team has studied the ins and outs of marijuana laws and is always up-to-date on evolving requirements and regulations. We have the tools to fast-track your business while helping you avoid misconceptions and roadblocks along the way. Are you ready to take the next steps towards starting your dream cannabis business?